On the go and no time to finish that story right now? Your News is the place for you to save content to read later from any device. Register with us and content you save will appear here so you can access them to read later.

Until very recently, it was boom time for the Pacific paradise of Palau.

More and more tourists were discovering the tiny nation, drawn to its reefs and forests, pristine beaches and the promise of a perfect slice of idyllic island life.

A record high of 162,000 tourists visited Palau in 2015 — double the number in 2005. And with tourism contributing more than 85 per cent of Palau's gross domestic product, the going was good — really good.

Now, Palau's stunning beaches, once swarming with holiday-makers, are empty. So too are the hotels, including mothballed building projects that started during the boom. Tour agencies have wound down, and tour boats to Palau's famous Rock Islands aren't going anywhere.

Palau, an archipelago of more than 500 islands in the western Pacific Ocean, has been brought to its knees after making a very powerful enemy: China.

Palau is one of 17 nations still diplomatically partnered with Taiwan, which provides Palau with more than $13 million a year in funding, as well as scholarships in education and medicine, according to Reuters.

But Palau's recognition of Taiwan does not align with Beijing's One China policy, which maintains Taiwan is part of China.

In November, in a move many took as Beijing pressuring Palau to shift its diplomatic focus away from Taiwan, China declared Palau an illegal destination, and threatened Chinese tour groups with fines of more than $NZ 65,000 if they took tourists there.

That move hit Palau right where it hurt.

Before the travel ban, Chinese tourists accounted for about half of all visitors to Palau. They're now gone.

Today, El Salvador announced it was ditching Taiwan and formally establishing diplomatic relations with China, marking another victory for Beijing.

The Dominican Republic and Burkina Faso both dropped ties with Taiwan in May, following the African island nation of São Tomé and Principe in 2016, and Panama in 2017.

Along with the Palau ban, Beijing has forbidden tour groups from going to the Vatican City — another tiny nation that recognised Taiwan.

Recently, Beijing has issued demands to foreign companies that still referred to Taiwan as a separate country, including airlines that listed the island separately to the People's Republic of China in flight itineraries. It made similar demands regarding Hong Kong and Macau.